Solicitor, Zoe Harker-Smith, looks at commercial property service charge disputes.
Service charges arise when parts of a commercial building are let to a tenant while the landlord retains other parts, which they remain responsible for looking after.
The charges payable by tenants of commercial premises can fluctuate and are largely dependent on the landlord’s overheads and expenditure in maintaining and providing services to the property. This includes the provision of utilities such as lighting, heating, and water, as well as cleaning and the upkeep of the common parts.
A tenant’s obligations to pay service charges are normally set out in the lease, with provisions specifying what services the landlord can charge for and the mechanism for charging the tenant. However, this is a fertile ground for legal disputes to arise.
Service charge provisions are often open to interpretation, creating grey areas. Tenants often feel they are being asked to pay charges that might properly be regarded as being an upgrade to the property rather than routine, planned maintenance. Another source of dispute is where a landlord seeks to pass on to a tenant the costs associated with upgrading a building to meet energy efficiency requirements.
A statutory code recommends how commercial service charges should be dealt with. Although it isn’t binding on landlords, it is an indication of what good practice should be.
Landlords usually produce an annual budget based on estimated expenses. Tenants will then pay in quarterly instalments with a reconciliation against actual expenditure at the end of the year.
Apportionment of service charges where there are multiple tenants is often based on the floor area each of them occupies.
When a commercial property service charge dispute arises, it should be dealt with in accordance with the provisions of the lease. In particular the lease may set out a timetable for and it is therefore important that the parties comply with the deadlines.
We deal with disputes nationwide, representing landlords and tenants. So, for further guidance on commercial property service charge disputes, please contact our free legal helpline. Call 0333 888 0404 or email us at [email protected].
